STELLAPPS TECHNOLOGIES PRIVATE LIMITED,BENGALURU vs. DC/ACIT CIRCLE 6(1)(1), BENGALURU

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ITA 2938/BANG/2025Status: DisposedITAT Bangalore27 October 2026AY 2016-175 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the assessee's appeal against the quantum proceedings (disallowance of provision for warranty) is pending before the learned CIT(A). Considering this, the Tribunal decided to restore the matter to the file of the jurisdictional Assessing Officer for fresh adjudication, without delving into the merits of the penalty levied under section 271(1)(c). The Tribunal directed that no order should be passed without affording a reasonable and adequate opportunity of hearing to the assessee. Consequently, the impugned order of the CIT(A) was set aside, and the grounds raised by the assessee were allowed for statistical purposes. The principle derived is that when the underlying quantum appeal is pending, and the penalty appeal is before the Tribunal, it is appropriate to remand the matter for fresh consideration by the Assessing Officer to ensure proper adjudication after the quantum issue is resolved.

What were the facts?

The assessee, Stellapps Technologies Private Limited, filed an appeal against an order dated 18/11/2025 passed by the CIT(A), NFAC, Delhi, for assessment year 2016-17. The appeal challenges a penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The original assessment accepted the assessee's return. However, reassessment proceedings were initiated based on a provision for warranty amounting to INR 40,15,231, which was disallowed and added to the assessee's income. Consequently, a penalty of INR 12,40,710 was levied. The CIT(A) dismissed the assessee's appeal, stating the grounds related to the quantum of addition. The assessee's appeal against the quantum addition is pending before the CIT(A).

What were the issues?

1. Whether the reassessment proceedings are illegal and void due to the issuance of a second notice under section 148 during the subsistence of reassessment initiated by the first notice (Section 147)? 2. Whether the second notice under section 148 dated 30/07/2022 is invalid for not bearing a DIN, violating CBDT Circular 19/2019? 3. Whether the reassessment order is time-barred under section 153? 4. Whether the mandatory procedure under section 148A was not followed correctly, rendering the reassessment void? 5. Whether there is a jurisdictional defect due to notices issued by multiple officers without lawful transfer of jurisdiction or sanction under section 151? 6. Whether there was a severe violation of natural justice, with notices under section 142(1) and 144 granting only 2 to 4 days' time? 7. Whether the disallowance of the warranty provision of INR 40,15,231 is contrary to law, specifically the Supreme Court's decision in Rotork Controls (P) Ltd. v. CIT? 8. Whether the penalty under section 271(1)(c) automatically collapses if the reassessment is invalid or quashed? 9. Whether the CIT(A) erred in failing to consider the assessee's legal grounds and violated section 250(6) by not passing a speaking order? 10. Whether, without prejudice, the penalty under section 271(1)(c) is unjustified on merits? 11. Whether the penalty computation is factually incorrect? Assessee's Contentions: The assessee argued that the reassessment proceedings are illegal on multiple grounds, including the issuance of a second 148 notice, lack of DIN on the 148 notice, time-barring of the reassessment, non-compliance with section 148A, jurisdictional defects, and violation of natural justice. The assessee also contended that the disallowance of the warranty provision is bad in law, relying on the Supreme Court's decision in Rotork Controls (P) Ltd. The assessee further argued that the penalty is consequential to the reassessment and should collapse if the reassessment is invalid. The assessee also raised issues regarding the CIT(A)'s failure to pass a speaking order and the merits of the penalty. Revenue's Contentions: The revenue relied upon the orders passed by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 250,Section 147,Section 148,Section 148A,Section 153,Section 151,Section 142(1),Section 144,Section 143(3),Section 143(2),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL

PER SANDEEP SINGH KARHAIL, JUDICIAL MEMBER: The assessee has filed the present appeal against the impugned order dated 18/11/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2016-17.

ITA 2938/BANG/2025 STELLAPPS TECHNOLOGIES PRIVATE LIMITED

2.

The Assessee has raised the following grounds of appeal:

1 Ground 1 The CIT(A) erred in law and facts in dismissing the appeal without adjudicating the validity of the reassessment proceedings, which constitute the foundation of penalty u/s 271(1)(c). 2 Ground 2: Reassessment proceedings u/s 147 are illegal and void since a second notice u/s 148 was issued during subsistence of reassessment initiated by the first notice. 3 Ground 3: The second 148 notice dated 30/07/2022 is invalid as it was issued without a DIN, violating CBDT Circular 19/2019. 4 Ground 4: The reassessment order is timebarred u/s 153.

5 Ground 5: Mandatory procedure u/s 148A was not followed correctly hence reassessment is void 6 Ground 6: Jurisdictional defect Notices issued by multiple officers without lawful transfer of jurisdiction OR sanction u/s 151. 7 Ground 7: Severe violation of natural justice Notices under 142(1) and 144 granted only 2 to 4 days time. 8 Ground 8: The disallowance of warranty provision of rs40,15,231 is contrary to law laid down by the Supreme Court in Rotork Controls (P) Ltd 180 Taxman 422. 9 Ground 9: Once reassessment is invalid OR quashed, penalty u/s 271(1)(c) collapses automatically. 10 Ground 10: CIT(A) erred in failing to consider Appellants legal grounds, violating section 250(6), which mandates a speaking order. 11 Ground 11: Without prejudice Even on merits, penalty u/s 271(1)(c) is unjustified. Ground 12: The penalty computation is factually incorrect. Ground 13: CIT(A) failed to exercise appellate jurisdiction properly, resulting in miscarriage of justice.

3.

The solitary grievance of the assessee is against the levy of penalty under section 271(1)(c) of the Act.

4.

The brief facts of the case are that the assessee is a private limited company engaged in building and construction. For the year under consideration, the assessee filed its return of income on 17/10/2016, declaring a net loss of INR 3,53,88,967. The return filed by the assessee was selected for scrutiny, and

ITA 2938/BANG/2025 STELLAPPS TECHNOLOGIES PRIVATE LIMITED statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. Vide order dated 15/12/2018 passed under section 143(3) of the Act, the scrutiny proceedings were concluded, accepting the return of income filed by the assessee. Subsequently, on the basis that the assessee had debited an amount of INR 83,01,496 towards warranty, which included an amount of INR 40,15,231 being the provision for warranty, reassessment proceedings were initiated. After completing the proceedings under section 148A of the Act, notice under section 148 of the Act was issued on 30/07/2022. During the reassessment proceedings, the assessee submitted that the provision for warranty was created on the basis of the historical information regarding possible future incidents of product failure. The assessee further submitted that even though provision for warranty expenses was made, the actual warranty expenses were much more than the provision for warranty. The Assessing Officer (“AO”), vide order dated 30/05/2023 passed under section 147 read with section 144B of the Act, disagreed with the submissions of the assessee and disallowed the provision for warranty to the tune of INR 40,15,231 and added the same to the total income of the assessee.

5.

In the meanwhile, penalty proceedings under section 271(1)(c) of the Act were initiated on this issue and, vide order dated 30/03/2024 passed under section 271(1)(c) of the Act, a penalty of INR 12,40,710 was levied on the assessee. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on the basis that the grounds pertain to the quantum of addition in the same challenge to the levy of penalty under section 271(1)(c) of the Act. Being aggrieved, the assessee is in appeal before us.

6.

During the hearing, the learned Authorised Representative (“learned AR”) submitted that the assessee’s appeal against the quantum proceedings is currently pending consideration before the learned CIT(A). On merits, the learned AR submitted that no disallowance can be made of the provision for warranty as the

ITA 2938/BANG/2025 STELLAPPS TECHNOLOGIES PRIVATE LIMITED same was made on a scientific basis and this issue is also covered by the decision of the Hon’ble Supreme Court in Rotork Controls India (P) Ltd. v. CIT: 314 ITR 62 (SC).

7.

On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the lower authorities.

8.

We have considered the submissions of both sides and perused the material available on record. Since the quantum appeal of the assessee against the disallowance of provision for warranty is currently pending before the learned CIT(A), without going into the merits of the penalty levied under section 271(1)(c) of the Act, we are of the considered view that this matter should be restored to the file of the jurisdictional Assessing Officer for fresh adjudication. We order accordingly. Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. With the above directions, the impugned order is set aside, and grounds raised by the assessee are allowed for statistical purposes.

9.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 27-Oct-2026.

Sd/- Sd/- (PRASHANT MAHARISHI) (SANDEEP SINGH KARHAIL) VICE PRESIDENT JUDICIAL MEMBER Bangalore, Dated, the 27-Oct-2026.

*VM* Copy to:

ITA 2938/BANG/2025 STELLAPPS TECHNOLOGIES PRIVATE LIMITED

STELLAPPS TECHNOLOGIES PRIVATE LIMITED, 46/4, NOVEL TECH PARK, 1 GARVEBHAVIPALYA, HOSUR ROAD, NEAR KUDLU GATE, BENGALURU-560068, KARNATAKA

DC/ACIT CIRCLE 6(1)(1), 2 BMTC BUILDING, KORAMANGALA, BENGALURU-560034, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE BY ORDER

ASSISTANT REGISTRAR I.T.A.T., BANGALORE

Digitally signed P G by P G RAJANI Date: RAJANI 2026.10.30 16:45:44 +05'30'

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